I would like to thank the Managed Futures Association and the Futures
Industry Association for inviting me to participate in this
ground-breaking conference. The explosive growth of derivatives
markets in the Asia-Pacific region and the impending change in Hong
Kong's status make this an ideal time and place for this historic
gathering.

At first glance, it may seem strange for a US regulator to be part of
a panel on business, economic and regulatory developments in Japan.
However, in today's global marketplace -- where capital moves
across borders with the tap of a computer key and trading goes on
around the clock, around the world -- I believe it is entirely
appropriate. I see my participation here today as symbolic of both the
need for, and the growing reality of, international regulatory
cooperation. In that context, I would like to devote my allotted time
to a US perspective on the regulatory reaction to the Sumitomo affair,
an event that illustrated only too well the globalization of the
marketplace and the critical importance of cooperation among markets
and regulators.

The Immediate Response

On June 13, 1996, the Sumitomo Corporation informed the CFTC and the
UK Securities and Investments Board (SIB) of unauthorized trading by a
Sumitomo trader that ultimately resulted in a $2.6 billion loss. Even
though Sumitomo's positions were held on the London Metal
Exchange, the CFTC was concerned about the effect of any resulting
volatility on US firms and markets, particularly the New York
Mercantile Exchange. Thus, we sought and received express assurances
from Sumitomo, prior to its public announcement of the trading loss,
that it would stand behind its positions and obligations. At about the
same time, we invoked the March 1996 Declaration on Cooperation and
Supervision of International Futures Markets and Clearing
Organizations and began sharing information with British regulators.
We also requested advice from US exchanges concerning the need for
improvements to market surveillance. In addition, we began an
investigation, which is still ongoing, into possible violations of US
law in connection with the Sumitomo affair. We are very grateful for
the excellent cooperation we have received from our counterparts in
Japan and the UK in this effort.

The Longer Term Response

The most significant response to the Sumitomo affair, however, was the
convening of an international conference in London, during November
1996, hosted by the CFTC, the SIB and the Japanese Ministry of
International Trade and Industry (MITI), in conjunction with the
Japanese Ministry of Agriculture, Forestry and Fisheries (MAFF). The
Sumitomo events had demonstrated that physical commodity markets like
copper, where delivery involves warehouses, railroads, trucks and
boats, can raise different regulatory issues than financial
instruments, which can be delivered by wire transfer. Therefore, the
hosts convened the London Conference bringing together regulatory
authorities from 17 countries responsible for overseeing physical
delivery commodity markets.

The regulatory authorities reached consensus and issued a Joint
Communiqu on a broad range of objectives generally aimed at achieving
common standards of best practice in contract design, proper market
surveillance techniques, and appropriate information sharing
practices, including the sharing of large trader position information.
Let me briefly summarize those objectives and the current status of
the program to accomplish them.

(1) Initiate surveys in the areas of contract design and market
surveillance -- The IOSCO private sector Consultative
Committee has agreed to participate in this and the other initiatives
arising out of the London Conference, thus creating a parallel private
sector effort to accomplish the London Conference objectives. Drafting
committees have been appointed and draft reports on the surveys will
be circulated for comment to all London Conference participants and
Consultative Committee members by May 15th.

(2) Designate contact persons to communicate surveillance
information -- A market surveillance emergency contact list
questionnaire has been distributed and a number of jurisdictions have
already responded. The final deadline for this questionnaire is April
11.

(3) Invite all London Conference Authorities to participate in
the International Regulatory Summary (describing each country's
derivatives regulatory system), which is compiled by the CFTC and
maintained by IOSCO on the Internet -- The invitation has been
extended to those regulators not already represented in the Regulatory
Summary and additions to the Summary are due to the CFTC by April
16th.

(4) Initiate efforts to amend the March 1996 Boca Raton
Declaration to permit all London Conference participants (as well as
other appropriate governmental authorities) to become
signatories -- It was announced at the March 1997
International Regulators Conference in Boca Raton, that six additional
countries had signed the Declaration, bringing the total to 20. In
addition, 62 exchanges and clearing organizations have signed the
companion exchange MOU. We anticipate that amendments to the
Declaration, to allow additional signatories, will be implemented in
the near future. Hopefully, Japanese regulators will also sign up to
the Declaration, perhaps during the final meeting of the London
Conference participants tentatively scheduled for October 30-31, 1997,
in Tokyo.

(5) Develop standards of best practice and guidelines in the
areas of contract design and market surveillance -- The actual
drafting of the standards is being done by one working party on
contract design, chaired by the CFTC, and a second working party on
market surveillance and information sharing, co-chaired by MITI/MAFF
and the SIB. The working parties met in Boca Raton in March and will
meet again in London in June and in Bergenstock, Switzerland, in
September (all in conjunction with previously- scheduled international
regulators' meetings). The final documents are scheduled to be
completed by the October 30-31 Tokyo meeting.

(6) Support efforts of others to prioritize information which
market authorities may share during specific market events --
Sumitomo brought to light a potential information sharing problem
under the Boca Declaration. Say, for example, during a market
emergency, Regulator "A" needs information from Regulator
"B." A makes a very broad request, to make sure it gets all
the data it might need. B may not fully appreciate just why A needs
all this data and what A plans to do with it. While these questions
are being resolved, the information exchange is delayed. To address
this type of problem, the CFTC and SIB proposed to IOSCO a framework
for information sharing. This system would identify the types of
information that may need to be shared on a fast-track basis in
various kinds of market emergencies, including: (1) a financial crisis
at a firm (e.g., Barings); (2) a major market move caused by
supply/demand factors (e.g., the 1987 crash) or political actions
(e.g., the Gulf war); or (3) price distortions or unusual volatility
in a particular contract (e.g., Sumitomo). Looking to our
hypothetical, appropriate guidelines will expedite information sharing
between A and B because: (1) A will know in advance the nature and
scope of data to request, based on the emergency at hand; (2) B will
have advance notice that the information requested is appropriate; and
(3) both parties will know the types of information they need to
maintain and share. At its September 1996 meeting, the IOSCO Technical
Committee agreed to begin drafting such information sharing
guidelines.

Conclusion

That's really all the information I can squeeze into my allotted
time. I hope that this rather narrow review of the regulatory reaction
to the Sumitomo events has served to illustrate my broader points
concerning both the need for, and the growing reality of,
international regulatory cooperation. The ultimate goal of this
exercise and others that are ongoing, or yet to come, is to establish
appropriate minimum regulatory standards for the global
exchange-traded derivatives marketplace.